Japan Financial Services Agency studies cryptocurrency trading margin

The Japan Financial Services Agency (FSA) plans to set a leverage limit on margin for cryptocurrency transactions, which will curb speculation and market risk.

According to a news report released by the Nikkei News on Thursday, financial market regulators are considering limiting the borrowing margin of crypto margin dealers to two to four times their deposits.

The report adds that there are currently no regulations specifically governing the field of cryptocurrency trading margins, and the exchange provides up to 25 times the ability to borrow.

This means that users can exchange cryptocurrencies worth up to 25 times their deposits with the exchange, but a 4% drop in the purchased crypto assets will essentially close the original funds.

The Nikkei noted that seven of the FSA’s 16 licensed exchanges now offer margin trading services. A panel of FSA officials and industry experts will discuss the rules governing potential risks in this area.

The news follows the statistics previously published by the FSA, indicating that Japanese cryptocurrency margin trading has grown rapidly.

For example, more than 80% of Japan’s cryptocurrency transactions in 2017 came from derivatives trading, reaching $534 billion. More than 90% of them come from margin trading.

Earlier this year, the Japan Virtual Money Exchange Association (JVCEA), a self-regulatory organization of 16 licensed trading platforms in Japan, pushed the margin to a four-fold limit.

“This is only a temporary measure – I don’t think the 4x ratio is enough,” the association’s chairman, Taizen Okuyama, quoted in the report.

On Wednesday, FSA officially awarded JVCEA as a “certified fund business settlement association” with the role of warning the legal situation of domestic cryptocurrency exchanges.
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